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French president Sarkozy, and German chancellor Merkel, announce the decision to seek treaty changes to make fiscal discipline a critical part of the new EU treaties. They issued an ultimatum to other EU countries to decide within a week whether they wanted to be part of a eurozone under this arrangement. In any case France and Germany will move ahead for a tighter union. Merkel stated- "We need structural changes. It is not possible to do this in the framework of the current treaties." Germany secured France's acceptance for having national budgets submitted for review by a supranational European body and automatic sanctions. France secured Germany's acceptance of a way to override this if automatic sanctions are blocked by a strong majority of members voting to this effect. On the issue of bondholders, of private creditors sharing in losses, France and Germany agreed to limit this to Greece. Merkel stated: "Greece is and will remain an exception," to which Sarkozy added, "the message to investors from across the world is that in Europe we pay back our debts."...

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Simon Nixon looks at the different scenarios for Greece as it faces snap elections on Jan. 25, 2015. He makes the point that unlike the situation in 2012 Greece's debt after considerable adjustment with creditors now looks sustainable. The nominal debt to GDP ratio remains high at over 170%, yet says Nixon, the long term average interest cost is about 2.3%. He even cites hedge fund Japonica Partners analysis showing Greece's debts valued on a discounted cash flow basis under international public accounting standards at a debt to GDP ratio of about 18%. Alexis Tsipras's left coalition if elected is likely to moderate its demands and continue with EU programs for Greece to restore confidence in financial markets and lower the interest rates on debt- including removal of special tax treatment exemptions and pension reforms. Support for EU membership remains high in Greece and Tsipras is likely to change his program to adapt just as Samaras and New Democracy Party did when it was elected....

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Perceptions of Turkey in Germany are shown here in DW.com. Turkey has 1.5 million people in Germany who vote in this election. About 70% of people in Germany see the opposition providing an alternative as good for the future of Turkey. The general perception is that Turkey is facing a severe crisis after the cost of living crisis and the earthquake, the Ukraine war cutting off food imports, that it needs foreign investment in the economy as a part of the US and European nations. The Republican party in the Opposition led now by a modest civil servant named Kilicdaroglu, was founded in 1921 by Kemal Ataturk when the colonial powers decided to breakup the Ottoman Empire and the Anatolian heartland. It was in Ankara that Ataturk formed the resistance to that plan and setup the modern state of Turkey by doing what Japan did- taking on western institutions, dress, education, and changing from Arabic to an alphabet that would increase literacy. A transformation that was a sort of miracle that was accomplished between 1921 and 1938 under Ataturk's leadership. Ataturk's vision at that time was that Turkey would be close partner to America and Europe. John F. Kennedy taped an audio broadcast on the 25th anniversary of Ataturk's death in 1963 at the White House pointing out Ataturk's achievement and vision. It is to this vision that the Republican party now moves after an effort over 2 decades to move the country back to its Ottoman period. That period happened around 1500. The Ottoman period lasted for only 150 years before it was pushed back in the 18th and 19th century by European powers. Before that Turkey and Constantinople was an integral part of European civilization. In fact modern Turkey under Ataturk and Greece maintained close relations and worked together in a shared responsibility to maintain peace in the Balkans, something almost forgotten today. Greece joined the western nations when US president Truman responded with American assistance during the 1950's, so did Turkey.  ...

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Public opinion in Germany now senses that politicians including Angela Merkel are reluctant to tell Germans that debt reduction has to be part of the solution for Greece, that some of the billions are lost and never coming back. They sense that Merkel and the Christian Democrats are waiting till after the elections in 2013 to bring this up directly. Even people on the street in Berlin know that Greece can never get back on its feet on the basis of spending cuts without debt reduction. The loan instalment approved in Nov. 2012 reflects the new approach of debt reduction but the German government is reluctant to talk about it. Opposition parliamentary leader Frank-Walter Steinmeier of the Social Democrats told ZDF German television: "The debt cut has not been avoided, it has been postponed to a time after the parliamentary elections. We are realistic and try to tell the people honestly and sincerely whats going on. Schauble and the present government try once more to finagle their way around the truth." Greece's debt has already reached 170% of GDP and can only go up as the economy shrinks further in year after year of recession. Norbert Barthle, a senior Christian Democrat, says if the debt reduction takes place today it sends the wrong signal to all the program countries, reducing the pressure for reforms and changes....

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Eurozone inflation was 0.4% for October 2014, according to Eurostat. Germany's inflation only 0.7%. Spain, Greece, and Italy slipping below 0% inflation.

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Alexis Tsipras of the Syriza Party stresses in his election campaign in September 2015 that even though he has accepted the Third Bailout Program from the EU, only Syriza will act so that the most vulnerable in society are protected. Tsipras openly accepts his mistakes and says he has learnt from his mistake of underestimating the resolve of the EU about its plans for the Greek economy. Syriza has also taken a sympathetic view of refugees and migrants coming to Greece. The Popular Unity Party and finance minister Varoufakis, a breakaway group from Syriza that advocates going back to the drachma, are not expected to do well in the election. New Democracy Party led by Meimarakis stresses in its campaign that Syriza is turning the recovery into an experiment and lacks the experience to implement the Third Bailout Program neogtiated withe the EU. Syriza and New Democracy are the leading parties in the election. It shows how much has changed in 2015, that the only two parties with some credibility are Syriza under Tsipras and New Democracy under Meimarakis, both having made errors but having the candour and courage to tell Greek voters that they have learned from their mistakes....

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The effects on Greece of a pullback in global financial markets in October 2014. Assurances that the Greek financial system and banking will be supported by the government and the EU. The pullback complicates the Samaras government's plan to exit the bailout program with the IMF early. There is also the prospect of new elections in early 2014 leading to a left of centre Syriza party government. Syriza's Tsipras says he would renegotiate the terms of the debt agreement to reduce debt owed to Germany and other countries in the EU.

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The ratification of the European Union's Fiscal Treaty of Dec. 2011 will require a two thirds majority in both houses of parliament. The coalition government of Angela Merkel lacks such a majority. This means the support of the Social Democrats and the Greens party will be needed to pass the treaty in Germany. The Social Democrats parliamentary leader Frank-Walter Steinmeier, says he cannot "picture an approval of the pact without growth-boosting measures." The Merkel position of strict austerity policies in tackling the eurozone debt crisis has come under intense criticism for lack of growth boosting measures. Recent economic performance clearly in Greece and Portugal, and to some extent in Ireland, Spain and Italy, shows the decline in GDP with austerity cuts alone will worsen the deficits or lead to a prolonged period of economic stagnation.

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Alexei Kudrin on the potential for a deep economic and political crisis in Russia if Greece exits the eurozone and Europe goes into a recession.

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The Economist warns in this editorial and cover issue that if Germany and the European Union do not act fast the Greek crisis could have a Lehmann like effect on Europe's banking systems, with a sovereign default. This would threaten the weaker economies of Portugal, Spain and Italy. As Simon Johnson has done on the pages of the New York Times, the Economist calls the German government and Chancellor Angela Merkel's handling of this crisis filled with ineptitude. Instead of leading the German people and giving a true account of things she followed public opinion- to see that Greece was punished for its mistakes and to provide a lukewarm show of support. A true account would have shown how Germay has gained from the euro, the huge portion of Greek debt that German banks hold, and the losses that the government would have to step in and avert in its banking system if Greece defaulted. Waiting till after a big regional election in Germany on May 9, was to show a lack of grasp of how such a crisis could explode if Greece in the meantime was shut out of capital markets (yield on Greek bonds shot up to 20%). Helping Greece was more in Germany's interest than an act of charity that public opinion in Germany seems to think it is. Other mistakes the Economist cites are- the idea that going to the IMF would be humiliating thus not bringing in the IMF actively much earlier. In the view of these experts it is the ineptitude that led to the loss of confidence in financial markets that now necessitates a much larger aid package for Greece, from $60 billon to $150 billion. The other is to have a slow decision making machinery in the Eurozone and knowing this not to have taken more aggressive action. Suggestions from the Economist as an adhoc measure- set up a single crisis management committee to make quick decisions. Set up a firewall between Greece and the other states like Spain and Italy so that contagion does not spread, with these countries also being shut out of financial markets at some future date if the situation deteriorates. The other is that the European governments should setup inter-governmental liquidity lines, and the European Central Bank act using the new arrangements....

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Interview with German Greens party politician, Jurgen Trittin, who could be finance minister in a Greens supported government. Trittin says his views are similiar to that of the IMF which is calling for debt relief for Greece. If elected in a Greens-SDP coalition, Trittin says, he would end the policy of purely cutting state expenditures.

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The new conservative administration of Mariano Rajoy is expected to cut spending to reduce the deficit from the 8.1% expected by analysts for 2011, to 3% in 2013. The deep cuts would worsen the unemployment rate of 20%. Spanish banks need recapitalization of 26 billion euros according to the European Banking Authority, about 2.5% of GDP. Spain's 10 year bond yields reached 6.34% on Nov. 15, 2011, close to Italy's 7.10%. With the situation worsening in Greece and Italy, the perception is that there is not much the Rajoy administration can do in the current situation to improve the economy in Spain. Rajoy's plans are to improve labor market flexibility, cut business taxes, and control government spending.

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Matina Stevis provides a glimpse of the views in Athens for retirees, students, company employees, and other people, as Greece heads for a referendum on July 5, 2015.

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The first signs of a change in Germany's position to promoting growth in Greece came when German chancellor Angela Merkel told CNBC on May 15, 2012: "I have the will, the determination to keep Greece in the euro zone." She added that if Greece's leaders are looking for "stimulus to be pursued for growth in the euro zone, which we could pursue in the interest of Greece, we're open for this. Germany is open for this." The Social Democrats, SPD opposition leaders have long said that Merkel is able to change positions as the situation changes. Looking back she even disassociated herself from her mentor German chancellor Kohl when he was not willing to disclose the names of donors for illegal donations. This has given her the flexibility that another Christian Democratic party leader Schauble lacked in leading Germany. She has also seen poll numbers favoring the CDU dissipate quickly before the 2005 elections and is aware how quickly situations can change, as is happening now with the public in France, Netherlands, Spain, Portugal, Ireland, Greece, and eastern european EU countries growing weary of strict austerity policies pushed by the CDU. A faction of the CDU pushed for strict austerity policies at the recent CDU convention in Leipzig, Germany. Merkel told the CDU about charges that she had shifted on a number of core issues such as nuclear energy, social issues, minimum wage, and euro zone bailouts- "Our political compass has not changed. The context is changing. This is a time of epic change."...

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Greek prime minister Papandreou talks to Charlie Rose about the support from the EU countries if push comes to shove and the adverse global impact of not helping Greece.

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This story is how hedge fund traders make money by buying credit default swaps for default protection on the debt of countries with huge debts. These countries are called by hedge fund traders as "the piigs" and money is to be made by buying these credit default swaps on countries when they are selling for less. As ripples appear such as the Dubai debt crisis and markets get nervous the protection prices rise making the credit defaults cost more. The countries where these traders expect problems are Greece, Ireland, Spain, Portugal and Italy. These investors take risks as these bearish positions were not reflected in economic conditions as confidence returned in 2009, but the longer term picture is fairly clear for these countries. Hedge funds doing this are Balestra Capital, Hayman Capital and North Asset Management, Pivot Capital Management.

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Barley points out that the Euro-zone austerity plans in Greece, Ireland, Portugal, Spain, the U.K. and other countries are coming in the context of a potential global slowdown. This will make it even harder for these countries to reduce debt and deficits. Greece had to make cuts and tax increases equivalent to 8% of GDP just to reduce the 2010 deficit by 5% after GDP declined more than expected according to the IMF. To reduce debt ratios nominal growth has to be higher than the average interest rate on debt. Its hard to see this happening and debt not increasing in some Eurozone countries.

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The joint statement after the G-8 summit stated that "our imperative is to promote growth and jobs." It stated the budget deficits need to be addressed but said "spending cuts must "take into account countries' evolving economic conditions and underpin confidence and economy recovery." Germany's Merkel in her remarks said growth and deficit reduction supported each other, that "we have to work on both paths, and the participants have made clear, and I think this is great progress." Opposition Social Democrats in Germany say Ms. Merkel is adept at changing as the situation changes, and it appears Merkel is making the transition away from strict austerity policies she had championed earlier. Especially now with fresh elections in France, Netherlands and Greece, and the election of Francois Hollande on a pro-growth platform, the German position of strict austerity is being increasingly questioned on all sides. French president Hollande met U.S. president Obama at a pre-arranged meeting prior to the summit. Obama and Hollande see the need to reduce high unemployment in the U.S. and Europe by encouraging growth, creating a common interest....

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Axel Weber, former head of the Bundesbank, did economic and monetary research at the University of Siegen, Germany, where he received his doctorate. He joined the economics faculty at the University of Bonn in 1994. This is unlike others in central banking who rose through finance ministries or national central banks. He was made head of the Bundesbank in 2004. He resigned recently after expressing his dissent when the ECB made the decision to buy the government bonds of Greece and other financially troubled eurozone countries. In his view the ECB should stick to its mandate for setting monetary policy and not get involved in fiscal policy. He returned to academia and will teach central banking at the University of Chicago till May 2012. He brings an unconventional approach by his willingness to talk to the media and express his dissent over issues that affect Europe and the global financial system. The same informal style he adopted in teaching and engaging in discussion at the University of Bonn. See the interview in the Wall Street Journal, June 27, 2011....

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Italy's prime minister, Mario Monti put it best when he said in a speech in Brussels in April 2012: "If a country becomes more productive and competitive, but there is no demand for its products domestically or around it, growth will not materialize." There is a new shift in opinion towards a balance of fiscal discipline with growth measures to get Europe back on track. The feeling in different parts of Europe is that the German view of austerity alone will not work for Europe. And the view is coming from the far right to the far left, from Marie Le Pen, far right presidential candidate in France, to the far right leader whose move to withdraw support to the government in Netherlands on the issue of austerity measures led to its collapse. Geert Wilders, leader of the Freedom Party in the Netherlands, said: "we don't want our pensioners to bleed just to meet the dictates from Brussels." The IMF has put out research that questions what is now called "the German hypothesis." The "German hypothesis," is based on the unique experience of Germany with the Hartz reforms under chancellor Schroeder which were based on wage restraint by workers, the German "kurzarbeit" program of government support for retaining workers with lower pay during cyclical downturns, improving competitiveness of German companies, and conservative budget practices. There appear to be two exceptions to this. One is that demand has to be strong outside or domestically for a country to reduce unemployment and improve productive capacity utlilization as it increases competitiveness. This was the case as Germany made the Hartz reforms under Schroeder. Wage restraint acts as a form of devaluing currency for reducing the cost of its products to improve exports. All leading parties and the unions are now in favor of wage restraint and lowering wages to preserve jobs to improve France's competitive position. Germany had the benefit of a decade to implement these reforms to reduce unemployment, because demand was not declining domestically or around it during its reforms. The situation is different in Spain where in all likelihood demand would shrink further with unemployment rising from 25% to higher levels, and higher sales taxes. This is why Francois Heisbourg, special advisor at the Paris based Foundation for Strategic Research, says about the current situation in Europe, that destroyiing Greece with strict austerity alone wasn't something the EU can look back at with the sense of having done the right thing, for Spain it appears misguided and lacking careful thought. The editors of the Wall Street Journal expressed the same sense when they described the March 2012 bailout of Greece as a tragic sideshow, because the main purpose was to buy time and insulate the other larger economies in the EU by giving the French, Spanish and German banks time to improve their financial position. The Journal called it bad for Greece leaving it with debt at 120% of GDP till 2020 and no economic growth, and bad for democracy as it was done against overwhelming Greek public opinion- The Tragic Greek Sideshow, Feb. 22, 2012. Volker Perthes, director of the German Institute for International and Security Affairs, a Berlin think tank, says the Germans have always viewed German leadership in Europe with discomfort, and would prefer a leadership where several states, France, Italy, Spain, and other countries in the EU coalesce around consensus positions. This is historically true for the German position since chancellor Adenauer. With the Free Democrats in decline, and the Social Democrats and the Pirate party doing well in recent German elections and favoring consensus in Europe, Merkel's Christian Democrats need to rethink their policy to give greater weight to economic growth for a consensus position in Europe. ...

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German industry says a complete shutoff of Russian gas to Germany would be catastrophic. Paul Krugman, an expert on international economics, looks at it in this NYT report. He says estimates show a worst case scenario drop of 2.1% in GDP for Germany to shutoff Russian supplies of energy. This estimate is from ECONtribute a thinktank from the Universities of Bonn and Cologne. This reluctance says Krugman to take the tough decisions such as turning off Russian energy supplies prolongs the war in Ukraine and its painful consequences in food scarcity and inflation all over Africa, Asia and Latin America. By comparison Greece, Ireland, Spain and Portugal went through severe downturns as a result of debt crises and economies that were mismanaged, with 27% loss of GDP in Greece, says Krugman.  Merkel's government argued for strict austerity policy during the eurozone financial crisis. By comparison says Krugman the shutoff of Russian energy supplies only imposes 2.1% loss in GDP that the German economy could handle.This estimate is also similar to estimates by Bruegel Institute and International Energy Agency, says Krugman. It would also speed up climate change action in Germany and set an example for Europe. German Economy minister Habeck's plan on alternative sources of renewable energy goes part of the way to accomplish this yet more needs to be done to correct the errors of policies from the Merkel administration that allowed German dependence on Russian energy to reach 55%. It is hard to comprehend why the Merkel administration could not be uneasy with something that would give Russia a huge leverage over the German economy and limit its voice in world affairs. It is now left to chancellor Scholz to correct the errors of the Merkel administration and of past members of his party the SPD, such as Mr. Steinmeier and the Schroeder SPD administration that preceded Merkel. Difficult questions have to be shouldered by the Christian Democrats and the Social Democrats. It is only through the courage shown by Annalena Baerbock of the Greens Party, in laying bare what these German policies were leading to, that Germany is recovering her voice in the world. In his speech to parliament making a U turn from the old policies Scholz credited Annalena Baerbock for the hard work in convincing Germans of the need for action.  ...

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Prince Philip's career in the Royal Navy is remembered here in The Times. His service off the cost of Greece, at Gibraltar, and off the coast of Sumatra, on British Navy ships is recalled. Here he is seen saving airmen in the seas in the war against Japan near Sumatra, and in attacks on Italian cruisers after Italy invaded Greece. During this period till 1947 Philip served in the Royal Navy. When asked about any "if only" he had in a BBC interview, Philip once said there were none, except one about his career in the Royal Navy. Here he was following his uncle Lord Mountbatten. During his service in the war he leaned some things in the Navy that became part of his personality, the way he was, his style so to speak.  This was about being matter of fact, just doing it, never complaining, getting on with it. Philip was on the HMS Whelp on September 2, 1945, when the Japanese surrendered. He saw British seamen then who had been prisoners for many years, returning from camps. He recalls seeing tears stream down their cheeks as they sat with him in the mess on the ship and recognized the familiar environment, they could'nt speak. Shaped by these experiences Prince Philip reflected the values of devotion to duty, humility, respect for women, and feeling humbled by life's experiences. The experience in the Navy shaped his view of life. When asked about how he coped with wartime dead and wounded he once said - "we did'nt have counsellors rushing around every time someone let off a gun. You just got on with it." Seen out of context his remarks during the last few decades seemed blunt, seen in the context of the Navy and his formative experience in the ships in these years it was just the way it was. Simply who he was, as he once replied. With it also came the kind of dedication to country, being the "rock" of support that he was for Queen Elizabeth over many decades, and his unique style, now cherished by his family, the country and the British Commonwealth.   ...